Posts Tagged ‘TARP’

Successful TARP Extended Through Most of 2010

Monday, February 22nd, 2010

Geithner extends TARP program through most of next year.  An independent audit released by the bipartisan Congressional Oversight Panel (COP) has found the $700 billion Troubled Asset Relief Program (TARP) to be effective, so much so that the Department of the Treasury has extended it to October 3, 2010.  Treasury Secretary Timothy Geithner plans to use the remaining funds to assist families facing foreclosure and give loans to small businesses.

The COP was unable to fully gauge TARP’s impact because of other forces such as the $787 billion American Recovery and Reinvestment Act, tax cuts and actions by the Federal Reserve and Federal Deposit Insurance Company.  “Even so, there is broad consensus that the TARP was an important part of a broader government strategy that stabilized the U.S. financial system by renewing the flow of credit and averting a more acute crisis,” according to the report.  “Although the government’s response to the crisis was at first haphazard and uncertain, it eventually proved decisive enough to stop the panic and restore market confidence.”

That said, after 14 months of TARP, the panel admits that problems remain.  Banks are still skittish about making loans, toxic mortgage-related assets are still sullying banks’ balance sheets and smaller banks are susceptible to difficulties in the commercial real estate sector.  And, with 13 million additional home foreclosures expected over the next five years, “TARP’s foreclosure mitigation programs have not yet achieved the scope, scale and permanence necessary to address the crisis.”

Repayments from banks that received TARP dollars are expected to total $116 billion, including $45 billion that is being returned by Bank of America.  The government is likely to receive as much as $175 billion in repayments from companies it rescued by the end of 2010.

Obama Takes Big Banks to the Woodshed Over Bonuses

Wednesday, January 27th, 2010

Obama seeks TARP restitution through a fee to be levied on banks – if Congress agrees.  President Barack Obama is angry with the big Wall Street banks that took TARP dollars and plans to do something about it.  “We want our money back and we’re going to get it,” Obama said in a White House speech when he proposed the Financial Crisis Responsibility Fee.  “If these companies are in good enough shape to afford massive bonuses, they surely are in good enough shape to afford to pay back every penny to taxpayers.”

The President’s proposal – which requires Congressional approval – would apply to approximately 50 of the nation’s largest financial institutions and rake in $9 billion a year for at least a decade.  Envisioned is an annual 0.15 percent fee on liabilities – except for insured deposits – and would be assessed on banks, insurance companies and financial firms with a minimum of $50 billion in assets.  The objective is to counterbalance $117 billion in losses from TARP.  The 10 largest financial firms would pay approximately 60 percent of the fee.

“My commitment is to recover every single dime the American people are owned,” according to the President.  “And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people, folks who have not been made whole and who continue to face real hardship in this recession.”

Not surprisingly, banks were not pleased with President Obama’s proposal.  “Two-thirds of the TARP investment from banks has already been repaid, with a large profit to the taxpayer,” countered Steve Bartlett, president of the industry trade group, the Financial Services Roundtable.  “This tax is strictly political.”

Another viewpoint advanced is that banks that haven’t repaid TARP funds haven’t done so because they served the original intent of the program – they made loans to consumers and businesses.

TARP Savings Could Finance Jobs Program

Wednesday, January 6th, 2010

Returned TARP funds could finance jobs creation program.  The $700 billion Troubled Asset Relief Program (TARP) cost $200 billion less than originally anticipated,  according to a new Treasury Department report.  That reflects faster repayments by big banks, as well as less spending on rescue programs as the financial sector recovers more quickly than expected.

And it’s good news for President Obama’s new job creation stimulus.  In a speech delivered at the nonpartisan Brookings Institution,  President Obama outlined a wide-ranging plan to create jobs that could be partially financed by the $200 billion in TARP funds that the government now expects to get back.

Among the job creation proposals detailed by President Obama are:

  • A tax cut for small business to encourage hiring.
  • Eliminate capitals gains on these businesses for one year.
  • Redirect leftover TARP money to support small business growth.
  • Invest new money in rebuilding roads, bridges and other infrastructure improvements.
  • Start a “Cash for Caulkers” plan that would give rebates to people who make their homes more energy efficient.

“Small businesses, infrastructure, clean energy:  these are areas in which we can put Americans to work while putting our nation on a sturdier economic footing,” according to President Obama.  “That foundation for sustained economic growth must be our continuing focus and our ultimate goal.”

The President’s proposals require Congressional approval.

Obama’s Job Plan Will Be More Successful if Driven by the Private Sector

Monday, December 21st, 2009

Job creation is driven by private sector investment, not government stimulus.President Barack Obama is well aware that private sector investment creates the majority of sustainable jobs, even though it goes against human nature to invest during hard economic times.  Federal stimulus money has saved/created between 600,000 and 1,500,000 jobs, according to the Congressional Budget Office – a faction of the 7,500,000 million jobs lost.  Lest we fault the Obama administration, remember that we generated one-third as many jobs during this decade as the 1990s.

According to Architecture 2030’s e-news bulletin, “Funding infrastructure projects with more stimulus dollars will not put America back to work. Why not?  Because infrastructure projects depend on tax revenue and the generator of tax revenue is the private sector.  Funding infrastructure projects with stimulus funds simply substitutes federal dollars for tax revenue dollars.  While some infrastructure spending and financial help to state and local governments is warranted, it will not put America back to work.  Each $1 billion of federal infrastructure spending creates only 7,667 one-time construction jobs and 9,000 indirect jobs.”

So what is the answer?  Architecture 2030 notes that, “The real engine behind American jobs is private building sector construction.  This sector is an amazing jobs machine, employing millions of Americans, spurring economic activity in almost every other U.S. sector, and generating large amounts of private investment and spending, as well as the tax revenue needed for infrastructure projects and other public services.  The bad news is the construction industry is reeling” and impacting many other sectors of the U.S. economy.

How Do You Solve a Problem Like TARP?

Wednesday, December 16th, 2009

The Obama Administration is giving serious thought to the best use of the remaining funds that are part of the Troubled Asset Relief Program (TARP) financial bailout. The President – under pressure to bring down the deficit that has grown as the government seeks to reverse the economic crisis — is considering using a significant amount of the leftover funds to reduce the national debt.The government is considering how to spend $139 billion in remaining TARP funds.

Approximately $139 billion of the $700 billion financial bailout program passed last year remains unspent and available to the Treasury Department.  Financial institutions have returned approximately $71 billion in TARP funds to the government and paid an additional $10 billion in interest and dividends to the Treasury Department.  The struggling economy and high unemployment rates are the impetus for paying down nearly $200 billion of the $12 trillion national debt.

Some Democrats in Congress think that unspent TARP funds should be used as an antidote to rising unemployment.  According to Representative John B. Larson (D-CT), chairman of the House Democratic Caucus, lawmakers could send a strong message about their priorities by using TARP funds to pay for road and bridge projects and other efforts that will create jobs.  “We want to look at how Wall Street can refund Main Street,” Larson said, noting that he and other senior House Democrats are considering a tax on financial transactions.  One possible use of unspent TARP funds could be payouts to small business programs to jump start job growth.

Buddy, Can You Spare a Job?

Monday, December 14th, 2009

With the national unemployment rate at 10.2 percent, President Barack Obama is focusing on job creation – the American public’s number one concern.  The administration’s “White House to Main Street” summit and tour is gathering advice from a variety of stakeholders, including business executives, small-business owners, economists, union officials and Ed Pawlowski, the mayor of hard-hit Allentown, PA.

The stakes are high because the Obama administration finds itself in the difficult position of wanting to create millions of new jobs without adding to the national debt.  “There’s one group that says we need to do more about the economy, more to create jobs,” according to political analyst Charlie Cook.  “And then there’s the other side that’s saying we’re blowing the heck out of the budget deficits.  And so they’re getting squeezed.”

“If we keep on adding to the debt, even in the midst of this recovery, at some point people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession,” the President said in an interview with Fox News.

In the meantime, Congress is considering job stimulus legislation that could combine extensions of COBRA, unemployment compensation and food stamps. Because the Democrats have very little money to spend right now, they know that a successful second stimulus will have to pack a powerful punch.  Senator Mark Warner (D-VA) wants to use $50 billion in leftover TARP funds to provide loans to small businesses.  Yet another proposal from Senator Jack Reed (D-RI) would use $600 million to subsidize employees who volunteer to have their hours cut to help companies avoid layoffs.  This approach has worked spectacularly well in Germany, which has not seen an uptick in unemployment this recession.

$700 Billion Financial Bailout Plan Still Evolving: Part 2

Monday, November 24th, 2008

Paulson’s TARP (Troubled Assets Relief Program) turnaround – he originally dismissed the bailout package as a recipe for “failure” -may demonstrate that his revised response is a gesture to public opinion.  At present, the bailout also seems geared more to help Main Street than Wall Street, a strategy that will play well with the general population.  Approximately half of the bailout money has been spent on emergency investments in banks and other institutions with the purpose of reviving the regular lending and borrowing that is vital to the nation’s economic health. According to Alan Ruskin, chief international strategist at RBS Global Banking and Markets, “This hasn’t done the Treasury’s credit a world of good.  Basically, they found that the market would applaud direct capital injections more easily than understanding the complexities of reverse auctions to buy more assets, so it’s a pragmatic choice.”

Who’s right?

http://www.reuters.com/article/ousiv/idUSTRE4AB7P820081112

http://www.chicagotribune.com/business/chi-thu-crisis-bailout-shift-nov13,0,2664351.story

$700 Billion Financial Bailout Plan Still Evolving

Friday, November 21st, 2008

Treasury Secretary Henry Paulson is sitting on $350 billion dollars of the taxpayers’ money, and can’t quite settle on the best way to spend it.  When approved by Congress in October, the $700 billion Troubled Assets Relief Program (TARP) bill’s purpose was to purchase bad mortgage assets that had frozen the credit markets. The Treasury Department has already used approximately half of the money to capitalize banks and prevent insurer American International Group (AIG) from going into financial default.  The problem with the TARP bill is that conditions keep changing and Treasury is altering its focus to one of helping banks that are sound to stay healthy – with the ultimate goal of thawing credit.  Meanwhile, Treasury is coordinating with the Federal Reserve to restore consumer confidence so people start buying cars, taking out student loans, or even using their credit cards again.  The question is:  which version of TARP eventually will unfreeze the debt markets.  Given the complexity of the situation, there is no simple answer.  Because both Wall Street and Main Street are equally impacted, TARP is likely to end up providing some amount of relief to both groups.

So, the question is, which TARP is it?  We invite your comments.

http://www.reuters.com/article/ousiv/idUSTRE4AB7P820081112

http://www.chicagotribune.com/business/chi-thu-crisis-bailout-shift-nov13,0,2664351.story